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Reflections on the 2024 Budget: How will it affect Inheritance Tax & Probate?


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Inheritance Tax thresholds.


Firstly, the IHT band remains fixed at £325,000. For beneficiaries and executors of estates this means that an increasing number of estates will fall within the IHT threshold.


We note that the average house price in the UK has risen to appx £292,000. However, within the ONS data there are currently approximately 1,000,000 homes valued between £300,000 and £350,000. A property is usually the most valuable asset in an estate, and therefore there are currently 1,000,000 properties on the cusp of potentially falling within the IHT threshold.


The practical reality of calculating and then paying IHT is becoming a reality for greater and greater numbers of executors. In 2022 (most recent HMRC data available) 28,000 estates were subject to IHT, a 70% increase from 2008/2009. Given the IHT band remains frozen, this announcement alone will ensure that more and more estates fall within the IHT threshold. More and more Executors will need to solve the problem of how to pay IHT ahead of obtaining Grant. 


Agricultural and Business Property Relief


In the year 2021 to 2022 1,730 estates applied for APR, and 4,170 applied for BPR. Total exemption was £4.4bn (HMRC Inheritance Tax: exemptions and reliefs, table 12.2). It is difficult to assess the overall impact of the changes (where assets over £1m will attract IHT at 20%) – estimates vary from as low as 2,000 to as many as 10,000. However, Level notes the following:


1 – By their very nature, these assets are high value (with a high IHT cost) and highly illiquid. Executors may struggle to generate the required liquidity to meet any required IHT ahead of obtaining Grant.


2 – The stated purpose of the exemptions was to avoid the need for family farms to sell off “parcels of land” to meet IHT. It is entirely possible that inheriting families would still like to achieve this outcome, and therefore have a need to pay IHT directly, rather than sell some (or all) of the family farm. 


Changes to APR and BPR are effective from April 2026


Unused Pension Funds


The consultation note from HMRC on this subject notes that recent changes to pension funds (including removing caps) have resulted in funds being used as a tax planning tool, rather than their main purpose to provide for retirement. The legislation for the proposed change is planned to come into force in April 2027.


The guidance notes this change is likely to only affect Defined Contribution (“DC”) schemes. Defined Benefit schemes (where the member receives an index-linked proportion of their final salary on retirement) rarely pass on any surplus. The guidance also notes the reporting requirements are likely to be complex, and provides for a potential “true-up”.


One important note is that Pension Scheme Administrators (PSAs) may be required to pay interest on any IHT for which they are liable. It is unclear how this interacts with the general duty of the executor to pay IHT as it falls due. 


In all cases, Interest for late payment of IHT is currently 7.5% (not including any fees or other fines that can be levied).


Conclusion: Overall impact


What is very clear is that more estates will fall within the IHT threshold over the coming years. Especially where the underlying assets are fundamentally illiquid (houses, farms, businesses) Executors will be faced with the dilemma of needing to pay IHT ahead of being able to liquidate estates. As well as the cash required, Executors will often wish to discharge this personal financial liability as quickly as they are able. 


Level is an award winning specialist lender, offering a wide range of litigation and probate funding products. Our Executor Loans offer a risk-free, non-recourse solution to Executors requirement to pay IHT and other Testamentary Expenses ahead of obtaining Grant of Probate.


As well as obtaining Grant as quickly as possible, by paying IHT Executors are able to discharge a large, personal liability quickly and easily. If you would like to speak to a member of the team, please enquire below:






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